SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-10-411234

DATE: 20120203

RE: WAYNE LEVY REALTY CORPORATION

and

RED CARPET INNS LIMITED

BEFORE: STEWART J.

COUNSEL: Charles Wagman, for the Plaintiff
Wendy Earle, for the Defendant

HEARD: August 2, 2011

ENDORSEMENT

Nature of Motion

[ 1 ] The Plaintiff and the Defendant have each brought a motion for summary judgment. Each party to the action seeks judgment in its favour.

[ 2 ] The Plaintiff Wayne Levy Realty Corporation (“Levy”) moves for summary judgment for payment of a real estate commission of $131,250.00 (inclusive of GST, prejudgment interest and costs) claimed to be owed by the Defendant. The Defendant Red Carpet Inns Limited (“Red Carpet”) asks for a dismissal of the action with costs.

[ 3 ] Both parties are in firm agreement pursuant to Rule 20.04(2)(b) that the facts and the issues raised in the proceeding are such that this is an appropriate matter for determination by way of summary judgment. No issue whatsoever is taken by either party as to the suitability of resort to Rule 20 to decide the entire matter and the evidentiary bases for the summary judgment motions without a trial.

[ 4 ] I am likewise satisfied that the action may be disposed of in the summary manner to which the parties have agreed.

Background Facts

[ 5 ] Levy is a licensed real estate broker whose sole representative and principal is Wayne Levy.

[ 6 ] The sole shareholder and principal of Red Carpet is Frank Vona (“Vona”).

[ 7 ] Red Carpet was the owner of property at 2169-2171 and 2173 Lakeshore Boulevard West in the City of Toronto. On February 10, 2010, this property was sold to Kingbird Development Inc. (“Kingbird”).

[ 8 ] Prior to this sale, Levy had represented a number of entities who were interested in buying Red Carpet’s property. From time to time Levy would telephone Vona to solicit his interest in selling the property. Between 2008 and 2009, a series of agreements of purchase and sale with Levy’s clients were entered into but never completed.

[ 9 ] To the extent any commission agreements between Levy and Red Carpet are relevant at all to the claim for commission for the sale which was completed, they establish only that Vona was not interested in seeing Levy receive a 2% commission on any sale and the highest commission considered fair and reasonable by him was 1%.

[ 10 ] In connection with an offer from Vianovus Capital Corporation (“Vianovus”) accepted by Red Carpet on October 27, 2008, Levy entered into a commission agreement with Red Carpet for payment of a commission of 1% of the purchase price of $15,000,000.00 upon closing. However, unbeknownst to Vona, Levy made a separate commission agreement with Vianovus which obligated Vianovus to pay an additional 1% of commission to Levy upon closing. The proposed sale to Vianovus was never completed.

[ 11 ] In July of 2009, Levy and Vona had an e-mail exchange with respect to the possibility of a sale to a developer. In this exchange, Levy raised the suggestion of a possible purchase price of $12.5 million with no conditions, an early closing and a 2% fee payable by Vona. Vona wrote in reply: “It was 1%. If you want more, increase it accordingly.”

[ 12 ] At the time of this exchange, no offers were actually presented or negotiated. Vona had no idea whom Levy represented. At no point in the exchange was there any agreement as to who, if anyone, would pay a commission. At no point in the exchange did Levy disclose to Vona any intention to seek an additional commission from any potential purchaser.

[ 13 ] On August 26, 2009, Red Carpet accepted an offer from The Stroud Development Corporation to purchase the property for $12,900,000.00, having a completion date of January 27, 2010 (the “Stroud Agreement”).

[ 14 ] Levy had no involvement in bringing about the Stroud Agreement. Humber Valley Realty (1997) was to be paid all real estate commissions with respect to the transaction.

[ 15 ] On October 6, 2009 Levy demanded payment of a real estate commission with respect to any sale arising out of the Stroud Agreement and claimed that he was entitled to such commission based on his previous dealings with the Vianovus Agreement. He alleged that the principals of Vianovus and the principals of The Stroud Development Corporation were one and the same.

[ 16 ] In any event, the Stroud Agreement was never completed. On November 22, 2009, The Stroud Development Corporation, Red Carpet and Humber Valley Realty (1979) entered into a mutual release which terminated The Stroud Agreement.

[ 17 ] On November 16, 2009, Red Carpet was presented with an offer from Soprano to purchase the property for $12,500,000, with a closing date of February 26, 2010. It is not disputed that Levy assisted and represented Soprano in making the offer. Vona denies having agreed to pay any commission to Levy in connection with this sale.

[ 18 ] The offer from Soprano included the following provision:

The Purchaser shall pay all real estate commissions incurred in respect of this Agreement and the Purchaser hereby agrees to indemnify the Vendor in respect of all real estate commissions incurred by the Vendor in connection with this Agreement.

[ 19 ] Levy e-mailed to Vona a copy of an unexecuted and undated commission agreement which required Red Carpet to pay Levy a 1% commission upon completion of the Soprano deal.

[ 20 ] On November 19, 2009, Levy again requested that Vona sign and return the commission agreement. Vona refused, pointing out to Levy that the Soprano offer specifically stated that any commission was to be paid by the Purchaser..

[ 21 ] Levy then e-mailed Paul McCarten, solicitor for Red Carpet:

From: Wayne Levy [mailto:wayne.levy@rogers.com]

Sent: Thursday, November 19, 2009 3:25 PM

To: McCarten, W. Paul

Subject: Re: Any word on the release of the deposit?

o.k. On a side note, Frank just hung up on me. He saw a clause that said commission was to be paid by Purchaser. That is an old clause. The deal I had arranged with Frank was 1% from each side which is what we did with the Gadzala property. Frank agreed to this last week now he is reneging. I think we are getting close to the finish line and I don’t want to get screwed. Is there anything you can do other than raising the offer by $125K. I can’t believe the amount of grief I have seen and dealt with on this property. No wonder why it hasn’t sold yet.

Sincerely,

Wayne

[ 22 ] McCarten responded as follows:

From: McCarten W. Paul

To: Wayne Levy

C.C. Frank Vona

Sent: Thursday, November 19, 2009 3:41 PM

Subject: RE: Any word on the release of the deposit?

I saw that clause as well at Section 15 of the Agreement. “Purchaser to pay all commission and indemnify Vendor for any commissions incurred in connection with this Agreement”.

On that basis, even if Frank signs a commission agreement, how is he obligated to pay any commission? This would be an adjustment to the purchase price in his favour on closing.

And just to make sure that it’s absolutely clear. I’d recommend adding some language to that Section so the Purchaser acknowledges that Vendor has signed a commission agreement that the 1% commission payable by the Vendor will be added as an adjustment on closing in the Vendor’s favour.

How else could Section 15 be interpreted?

[ 23 ] Levy replied:

From: Wayne Levy [wayne.levy@rogers.com]

Sent: Thursday, November 19, 2009 3:51 PM

To. McCarten, W. Paul

Cc. Frank Vona

Subject: Re: Any word on the Release of the Deposit?

This clause was there in the Gadzala agreement as well. But Mr. Gadzala agreed to split the commission 1% each regardless of that clause probably because I worked hard on selling this property for years. I would just take out the clause altogether. There is no reason for it to be there. Other than to cut me out. I will try to get my client to pay the whole thing since Frank is refusing to pay me 1%. Alternatively, maybe the signback comes $125,000 higher and then I collect my 1% from Frank since he will net the same amount anyways. I will speak with my client and see what hey [sic] would like to do and let you know.

Sincerely,

Wayne

[ 24 ] On November 20, 2009, Levy pressed his suggestion to McCarten and Vona to have Red Carpet sign back the Soprano offer at an increased price of $12,625,000 and include a 1% commission payable to Levy by Red Carpet because Levy’s client, Soprano, would not pay Levy more than a 1% commission on the deal.

[ 25 ] I agree with the position advanced by Red Carpet that Levy’s request at this stage was solely in aid of his interest in getting a higher rate of commission and ran contrary to any duty owed by Levy to either Soprano or Vona.

[ 26 ] On November 23, 2009, Levy e-mailed McCarten and requested again that the price demanded for the property be increased to $12,625,000 and that Red Carpet sign a commission agreement and agree to pay a 1% commission to Levy. McCarten replied only that he would forward Levy’s request to Vona. Neither Vona nor McCarten responded further to Levy’s request.

[ 27 ] On December 4, 2009, Red Carpet accepted a revised offer from Soprano’s related company, Kingbird, to purchase the property for the sum of $12,500,000. The commission provision remained unchanged. No commission on the deal was payable by Red Carpet to Levy or any other agent.

[ 28 ] On February 26, 2010, the deal with Kingbird closed. Red Carpet transferred the property to Kingbird for the price of $12,500,000.00.

[ 29 ] On closing, Kingbird paid Levy a 1% real estate commission in accordance with the agreement Kingbird had with Levy to which Red Carpet was not a party.

[ 30 ] The material, including the historical sequence of agreements and documented exchanges between the parties, clearly establishes that there was never any agreement that Red Carpet must pay a commission to Levy on the closing of the Kingbird deal.

[ 31 ] Even if there was such an agreement, which is impossible to conclude from this evidence, it would have been achieved only by Levy’s putting his own commercial interest ahead of Vona’s. His simultaneous representation of the purchaser and vendor placed him in an obvious conflict of interest. In such circumstances, Levy would not be entitled to recover a commission even if he had been promised one without full disclosure to and agreement of the clients. There is no, or at the very least inadequate, evidence of fulfillment by Levy of these requirements.

[ 32 ] As the Ontario Court of Appeal has observed, a principal is entitled to have an honest agent and only an honest agent is entitled to receive his commission. If it turns out that a person was not acting entirely as agent for his or her principal, but was directly or indirectly working for the other party to the contract in such a way as possibly to sacrifice, in whole or in part, the interests of that principal, such agent is not entitled to any commission (see: S.E. Lyons Ltd. v. Arthur J. Lennox Contractors Ltd. [1965] O.W.N. 624 (H.C.) and Raso v. Dionigi (1930) O.J. 670 (Ont. C.A.) ).

[ 33 ] Hence, even if the existence of a commission agreement with Red Carpet could have been established by Levy, it would be incapable of enforcement due to Levy’s failure to fully and candidly disclose this dual agency role and to obtain the informed and unequivocal consent of Red Carpet and Kingbird to such an arrangement. In this case, the evidence establishes that any possibility of an entitlement to a commission payable by Red Carpet to Levy was only wishful thinking on Levy’s part.

Conclusion

[ 34 ] For these reasons, the cross-motion is granted and this action is dismissed.

Costs

[ 35 ] If the parties cannot agree on the subject of costs written submissions on costs may be delivered to me by Red Carpet within 20 days of the release of this decision, and by Levy within 20 days thereafter.

STEWART J.

Date: February 3, 2012